Tennessee affiliate broker Howard represents the Steinbergs in selling their home. The Steinbergs instruct Howard to tell all prospective buyers that the home has never had a pest problem. Howard has never personally inspected the property for pests and has no knowledge of any pest history. A buyer later discovers significant termite damage that was present before the sale. The Steinbergs claim they genuinely did not know about the termites. Which statement best describes Howard's potential liability for the misrepresentation?
Correct Answer
B) Howard may be liable for negligent misrepresentation because he made an affirmative statement about the property's condition without a reasonable basis for that statement
Under Tennessee agency law and TREC regulations, a licensee who makes an affirmative statement about a property's condition without a reasonable basis for that statement may be liable for negligent misrepresentation, even if the licensee did not know the statement was false. Howard had no personal knowledge about the pest history and no basis for asserting the home had 'never had a pest problem.' Making an unverified affirmative claim — rather than saying 'I have no knowledge of any pest problem' — creates potential liability. The duty of obedience does not extend to making unverified material representations.
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Related Topics & Key Terms
Key Terms:
Related Concepts
In real estate, a client is someone to whom the agent owes fiduciary duties through an agency relationship, while a customer is a third party to whom the agent owes only honesty and fair dealing.
An arrangement where a brokerage assigns separate agents within the firm to represent the buyer and seller in the same transaction, allowing each client to have dedicated representation.
A situation where a single agent or brokerage represents both the buyer and the seller in the same real estate transaction.
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